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On the Evolution of Market Institutions: The Platform Design Paradox

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  • Carlos Alós-Ferrer
  • Georg Kirchsteiger
  • Markus Walzl

Abstract

We study competition among market designers who create new trading platforms, when boundedly rational traders learn to select among them. We ask whether efficient platforms, leading to market - clearing trading outcomes, will dominate the market in the long run. If several market designers are competing, we find that traders learn to select non-market clearing platforms with prices systematically above the market-clearing level, provided at least one such platform is introduced by a market designer. This in turn leads market designers to introduce non-market clearing platforms. Hence platform competition induces non-competitive market outcomes.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/149586.

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Date of creation: Mar 2010
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Publication status: Published in: Economic journal (2010) v.120 n° 543,p.215-243
Handle: RePEc:ulb:ulbeco:2013/149586

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Cited by:
  1. Maria Bas & Ivan Ledezma, 2007. "Market Access and the Evolution of within Plant Productivity in Chile," CESifo Working Paper Series 2077, CESifo Group Munich.
  2. Simon Weidenholzer, 2010. "Coordination Games and Local Interactions: A Survey of the Game Theoretic Literature," Games, MDPI, Open Access Journal, vol. 1(4), pages 551-585, November.

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